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Disappointing deal

Rochester Business Journal

March 29, 2013

Gov. Andrew Cuomo is proud of the 2013-14 state spending plan. As state lawmakers worked their way through budget bills, the governor dismissed criticism heard from both sides of the political spectrum about the agreement, preferring to highlight the fact that New York's third straight on-time budget was on its way.

After years of dysfunction in Albany, repeated on-time budget passage is laudable. But it's not everything, and truth be told, there's good reason to be disappointed in the new spending plan.

The governor maintains that New York no longer is a place where high spending and taxes prompt many people and businesses to move elsewhere. Many people who own and run those businesses don't share that view, however, and the new budget is likely to fuel that sentiment.

The budget includes an increase in the $7.25-an-hour minimum wage to $9 over three years. This will benefit a number of New Yorkers, but not as many as some people believe. (As argued here before, the Earned Income Tax Credit-which is available to all personal income tax filers-is a more effective tool for helping lower-income households.) It also will drive up costs for many businesses, some of which face out-of-state competitors with lower labor costs (a drawback that a federal minimum wage hike would avoid).

In addition, as Unshackle Upstate executive director Brian Sampson discusses in this week's Q4, the extension of the Temporary State Assessment Surcharge-the so-called 18a energy tax-amounts to a tax hike. The increase enacted in 2009 would have expired next year but now will be extended for several more years.

Separately, the budget once again does nothing to make the distribution of funds through Aid and Incentives to Municipalities more equitable. A recent report from state Comptroller Thomas DiNapoli underlined something Rochester officials know all too well: The city's share of AIM funding is disproportionately low. Give Rochester aid equal to the upstate average, and it would receive $31 million more annually.

Yes, the budget does contain some tax breaks for small businesses and middle-class residents. It also keeps the increase in state spending to less than 2 percent.

But in too many ways, the budget deal backs misguided priorities and sends the message that New York will continue to be a challenging place to grow a company.